2012 Ruling 2011-0401811R3 - Post-Mortem Planning

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Post-Mortem pipeline planning.

Position: Favourable rulings provided.

Reasons: In accordance with the provisions of the Act and our previous

Positions.

XXXXXXXXXX
						2011-040181

XXXXXXXXXX, 2012

Dear XXXXXXXXXX:

RE: Advance Income Tax Ruling
XXXXXXXXXX
Account Number: XXXXXXXXXX
Tax Services Office: XXXXXXXXXX
Taxation Centre: XXXXXXXXXX

We are writing in response to your letter dated XXXXXXXXXX in which you request an
advance income tax ruling on behalf of the above-noted taxpayers. We also acknowledge
the additional information provided in your various emails, as well as the information
provided during our telephone conversations (XXXXXXXXXX).

You have advised us that to the best of your knowledge and that of the taxpayers
involved, none of the issues contained in this advance income tax ruling is:

(a) dealt with in an earlier tax return of any of the taxpayers or a related person;
(b) being considered by a tax services office or taxation centre in connection with a
previously filed tax return of any of the taxpayers or a related person;
(c) under objection by any of the taxpayers or a related person;
(d) before the courts or, if a judgment has been issued, the time limit for appeal to a
higher court has not expired; or
(e) the subject of an advance income tax ruling previously issued by the Directorate.
Unless otherwise indicated, all monetary amounts are expressed in Canadian dollars.

Throughout this letter, the corporate and individual taxpayers will be referred to as
follows:

(a) “Child 1” means XXXXXXXXXX of Mr. X and Mrs. X;

(b) “Child 2” means XXXXXXXXXX of Mr. X and Mrs. X;

(c) “Child 3” means XXXXXXXXXX of Mr. X and Mrs. X;

(d) “Child 4” means XXXXXXXXXX of Mr. X and Mrs. X;

(e) “Children” means collectively Child 1 through Child 4;

(f) “Estate” means XXXXXXXXXX;

(g) “Holdco” means XXXXXXXXXX, a corporation incorporated under the
XXXXXXXXXX, the shareholding of which is described in Paragraphs 16 to 18;

(h) “Mr. X” means XXXXXXXXXX (Social Insurance Number XXXXXXXXXX)
who passed away on XXXXXXXXXX;

(i) “Mrs. X” means XXXXXXXXXX (Social Insurance Number XXXXXXXXXX),
Mr. X’s wife;

(j) “Newco” means a corporation to be incorporated by Trust under the
XXXXXXXXXX as described in Paragraph 25;

(k) “Opco” means XXXXXXXXXX, a corporation incorporated under the
XXXXXXXXXX, which is a subsidiary wholly-owned corporation of Holdco;

(l) “Trust” means XXXXXXXXXX which is a testamentary trust created by
operation of Mr. X’s Will.

I. DEFINITIONS

In this letter, unless otherwise expressly stated, the following terms or expressions have
the meaning specified:

(a) XXXXXXXXXX;

(b) “Act” means the Income Tax Act, R.S.C. 1985 (5th Supp.) c. 1, as amended and,
unless otherwise noted, every reference herein to a part, section, subsection,
paragraph or subparagraph is a reference to the relevant provisions of the Act;

(c) “adjusted cost base” (“ACB”) has the meaning assigned to that term in section
54;

(d) “affiliated persons” has the meaning assigned to that term in subsection 251.1(1);

(e) “agreed amount” means the amount agreed on by the transferor and transferee in
respect of the transfer of an eligible property in a joint election filed pursuant to
subsection 85(1);

(f) “Canadian-controlled private corporation” (“CCPC”) has the meaning assigned to
that term in subsection 125(7);

(g) “capital dividend account” (“CDA”) has the meaning assigned to that term in
subsection 89(1);

(h) “capital property” has the meaning assigned to that term in section 54;

(i) “Class G preferred shares” means the Class G Series 2 preferred shares of the
capital stock of Holdco;

(j) “connected” has the meaning assigned to that term in subsection 186(4);

(k) “CRA” means the Canada Revenue Agency;

(l) “disposition” has the meaning assigned to that term in subsection 248(1);

(m) “fair market value” or “FMV” means the highest price available in an open and
unrestricted market between informed and prudent parties acting at arm’s length
and under no compulsion to transact;

(n) “general rate income pool” or “GRIP” has the meaning assigned to that term in
subsection 89(1);

(o) “Note 1” means the promissory note issued by Newco to the Trust in
consideration for the transfer of the Class A common shares of capital stock of
Holdco held by the Trust as described in Paragraph 27(a) of the Proposed
Transactions;

(p) “Note 2” means the promissory note issued by Newco to the Trust in
consideration for the transfer of the Class G preferred shares of capital stock of
Holdco held by the Trust as described in Paragraph 28 of the Proposed
Transactions;

(q) “Notes” means collectively Note 1 and Note 2;

(r) “paid-up capital” (“PUC”) has the meaning assigned to that term in subsection
89(1);

(s) “Paragraph” means a numbered paragraph in this letter;

(t) “Proposed Transactions” means the transactions that are described under the
heading “Proposed Transactions” in this letter;

(u) “qualified small business corporation share” (“QSBC share”) has the meaning
assigned to that term in subsection 110.6(1);

(v) “refundable dividend tax on hand” or “RDTOH” has the meaning assigned to that
term in subsection 129(3);

(w) “related person” has the meaning assigned to that term in section 251;

(x) “series of transactions or events” includes the transactions or events referred to in
subsection 248(10);

(y) “subsidiary wholly-owned corporation” has the meaning assigned to that term in
subsection 248(1);

(z) “taxable Canadian corporation” has the meaning assigned to that term in
subsection 89(1);

(aa) “taxable dividend” has the meaning assigned to that term in subsection 89(1);

(bb) “Valuation Day” and “V-Day” means XXXXXXXXXX.

II. FACTS

1. At the time that Mr. X passed away on XXXXXXXXXX, he held
XXXXXXXXXX Class A common shares and XXXXXXXXXX Class G
preferred shares of the capital stock of Holdco. Upon his death, these shares were
transferred to a testamentary trust by operation of Mr. X’s Will, with the residual
of his Estate being transferred to his spouse, Mrs. X.

2. Mrs. X holds the remaining shares in Holdco. Her shares currently consist of
XXXXXXXXXX Class B common shares and XXXXXXXXXX Class G
preferred shares. At the time of Mr. X’s death, however, she held an additional
XXXXXXXXXX Class G preferred shares which were subsequently redeemed
on XXXXXXXXXX. At the time of this share redemption, Mrs. X and Holdco
were not persons affiliated with each other.

3. Mr. X held de jure control of Holdco prior to his death and, similarly, the Trust
holds de jure control of Holdco prior to the commencement of the Proposed
Transactions.

4. Holdco was incorporated on XXXXXXXXXX and is at all relevant times a CCPC
and a taxable Canadian corporation. Holdco carries on XXXXXXXXXX.
Holdco has a XXXXXXXXXX taxation year end and files its tax return with the
XXXXXXXXXX Tax Services Office of the CRA.

5. At the time of Mr. X’s death, it is estimated that the FMV of Holdco was
$XXXXXXXXXX. Approximately XXXXXXXXXX% of the estimated value of
Holdco’s assets was attributable to Opco, a subsidiary wholly-owned corporation
of Holdco. These estimates are derived from a draft formal valuation as at
XXXXXXXXXX, as well as Holdco and Opco’s unaudited financial statements
for the taxation periods ending XXXXXXXXXX, respectively. The mix and
value of the assets that Holdco currently holds remain substantially the same as
reported in the previously mentioned financial documentation.

6. Holdco’s remaining assets consist of XXXXXXXXXX. There has not been a
material change in the composition of Holdco’s assets and liabilities, since
XXXXXXXXXX. Moreover, there will not be any material change in the
composition of Holdco’s assets or liabilities from the date of this letter until the
date the Proposed Transactions described herein are completed.

7. Holdco has the following amounts in its tax accounts (estimated as of
XXXXXXXXXX):

a. RDTOH - nominal;

b. GRIP - $XXXXXXXXXX; and

c. CDA - $XXXXXXXXXX.

8. Opco was incorporated on XXXXXXXXXX and is at any relevant time a CCPC
and a taxable Canadian corporation. Opco engages in the XXXXXXXXXX.
Opco has a XXXXXXXXXX taxation year-end and files its tax returns with the
CRA’s XXXXXXXXXX Tax Services Office.

9. Opco has the following amounts in its tax accounts (estimated as of
XXXXXXXXXX):

a. RDTOH - nil;

b. GRIP - $XXXXXXXXXX; and

c. CDA - nominal.

10. Mr. X, as President of both Holdco and Opco prior to his death, was active in the
management of the companies’ respective businesses, from the time that each
company was incorporated, right up until the time of his death. Mr. X was in the
office on a daily basis during that time, making regular investment decisions for
Holdco and management decisions in respect of Opco’s XXXXXXXXXX
activities.

11. Prior to Mr. X’s death, three employees were involved in the activities of the
company, fulfilling the roles of Corporate Counsel (Child 1), Controller and
Administrative Assistant respectively. The individuals and their respective positions were similarly employed in Opco before Mr. X’s death. Subsequent to Mr. X’s death, the same positions and functions continue to exist; however, Child
1 initially took on the additional role of acting President of both Holdco and
Opco. Currently, Child 4 is the acting President of Holdco.

12. Subsequent to Mr. X’s death, the Children were appointed as directors of both
Holdco and Opco. The directors meet regularly for board meetings for both
corporations and frequently are in contact in the interim to discuss the
corporations’ day to day activities. Child 4 is in regular communication with
Holdco’s investment advisor and Child 4 is responsible for keeping the other
directors informed of the company’s investments through the board meetings and
the interim communications. Child 4’s activities assist the board in making
informed and timely investment decisions consistent with Mr. X’s investment
philosophy, namely the continued conservation and preservation of capital.

13. Subsequent to Mr. X’s death, the management activities for Opco were
transferred to Child 1 as acting President, and to the Children as directors. The
management decisions in respect of Opco primarily pertain to the corporation’s
XXXXXXXXXX activities. In particular, the management activities include, for
example: making decisions regarding XXXXXXXXXX – i.e. whether the
company would participate in XXXXXXXXXX activities relating to existing or
new interests; making decisions regarding production – i.e. whether certain
techniques should be used to XXXXXXXXXX, including consideration as to the
potential costs and benefits of doing so; and, making decisions regarding the
hiring of operators for the XXXXXXXXXX in which the company holds a 100%
interest.

14. To ensure that the company continues to operate effectively following Mr. X’s
death, the directors have engaged a XXXXXXXXXX consultant as well as
XXXXXXXXXX.

15. Child 1, the acting President of Opco and Corporate Counsel for Holdco, is in the
office on a daily basis, while the other three directors are in regular
communication in the interim between board meetings in order to ensure that
management decisions for both corporations are made in a timely manner.

16. At the time of his death, Mr. X’s Class A common shares of the capital stock of
Holdco had an estimated value of $XXXXXXXXXX, while his Class G preferred
shares of the capital stock had a value of $XXXXXXXXXX. Furthermore, Mr.
X’s Class A common shares of the capital stock of Holdco had an ACB and PUC
of $XXXXXXXXXX, while his Class G preferred shares of the capital stock of
Holdco had an ACB of $XXXXXXXXXX (based on the valuation day value by
virtue of being shares substituted for shares which existed on V-day) and PUC of
$XXXXXXXXXX.

17. Mrs. X currently holds XXXXXXXXXX Class B common shares and
XXXXXXXXXX Class G preferred shares of the capital stock of Holdco. Mrs.
X’s outstanding Class B common shares and the Class G preferred shares of the
capital stock of Holdco have an ACB of $XXXXXXXXXX and
$XXXXXXXXXX respectively. Each of these amounts represents a V-day value.
The PUC of Mrs. X’s common shares of the capital stock of Holdco is
$XXXXXXXXXX, while the PUC of her Class G preferred shares of the capital
stock of Holdco is $XXXXXXXXXX.

18. The Class A and Class B common shares of the capital stock of Holdco are
voting, participating shares. The Class G preferred shares of the capital stock of
Holdco are non-voting, non-participating shares, with a redemption value of
$XXXXXXXXXX per share. The Class G preferred shares of the capital stock
are both redeemable and retractable.

19. The shares of the capital stock of Holdco were capital property to Mr. X. In
accordance with subsection 70(5), Mr. X was deemed to dispose, immediately
before his death, of the shares of the capital stock of Holdco he owned for
proceeds equal to the FMV of the property at that time, resulting in a significant
capital gain. The Holdco shares were not QSBC shares and, consequently, Mr. X
was not eligible to claim the capital gains exemption on the shares of the capital
stock of Holdco nor did Mr. X, or any non-arm’s length person to Mr. X,
previously make any capital gains exemption claim in respect of these shares.

20. The Trust was deemed to acquire the shares of the capital stock of Holdco at the
time of Mr. X’s death at a cost equal to the FMV of the shares immediately before
his death on XXXXXXXXXX. The shares of the capital stock of Holdco are
capital property to the Trust. The Trust’s first year-end was XXXXXXXXXX.

21. The adult capital and income beneficiaries of the Trust are Mr. X and Mrs. X’s
four children: Child 1, Child 2, Child 3 and Child 4. All income and capital of
the Trust is to be distributed to these beneficiaries with the exception of
$XXXXXXXXXX per each grandchild capital beneficiary, to be distributed
XXXXXXXXXX years from the death of Mr. X. As well, XXXXXXXXXX% of
the Trust’s income earned during the XXXXXXXXXXyear of the Trust is to be
distributed to each grandchild income beneficiary XXXXXXXXXX years from
the death of Mr. X. The Trust indenture also stipulates that if one of the adult
capital and income beneficiaries dies, that adult’s share will be equally divided
among his/her children. All adult capital and income beneficiaries are Canadian
residents. The Children are also the trustees of the Trust.

22. In accordance with the provisions of Mr. X’s Will, the trustees are only permitted
to make capital distributions as follows: XXXXXXXXXX% of the Trust’s
capital at each of XXXXXXXXXX years following the death of Mr. X.

23. The head office address for Holdco, Opco and the Trust is XXXXXXXXXX.

24. The FMV of the shares of the capital stock of Holdco at the time that the shares
will be transferred to Newco in accordance with the Proposed Transactions, will
be equal to or exceed the FMV of those same shares of the capital stock of Holdco
as determined at the time of Mr. X’s death, being XXXXXXXXXX.

III. PROPOSED TRANSACTIONS

25. The Trust will incorporate Newco. Newco will be at all relevant times a CCPC
and a taxable Canadian corporation. The Trust will subscribe for
XXXXXXXXXX Class A common shares in Newco for $XXXXXXXXXX
while Mrs. X will subscribe for XXXXXXXXXX Class B common shares in
Newco for $XXXXXXXXXX. The Trust will hold de jure control of Newco.

26. Newco’s Class A and Class B common shares will be voting, participating shares.
Newco’s authorized share capital will include Class G preferred shares which will
be non-voting and non-participating shares. Each Class G preferred share will be
redeemable and retractable for an amount (the “Redemption Amount”) equal to
the FMV of the consideration received by Newco upon the issuance of such share.
Each Class G preferred share will entitle its holder to receive on the dissolution or
winding-up of Newco, a distribution of the net assets of Newco in an amount
equal to the Redemption Amount in priority to any distribution to be made to the
holders of the Newco Class A and Class B common shares. No dividends or other
distributions will be paid on any shares ranking junior to the Class G preferred
shares if the effect of such dividend or other distribution would be to reduce the
net realizable value of the assets of Newco to an amount less than the aggregate of
the Redemption Amounts of the Class G preferred shares.

27. The Trust will transfer its Class A common shares of the capital stock of Holdco
to Newco. The Trust will receive as consideration:

a. Note 1 issued by Newco for an amount equal to the FMV of the Class A
shares of the capital stock of Holdco as at the date of Mr. X’s death, and

b. Class G preferred shares of the capital stock of Newco with a FMV and a
redemption amount equal to the excess, if any, between the FMV of the
Class A common shares of the capital stock of Holdco as at the date of
transfer and the FMV of the Class A shares of the capital stock of Holdco
as at the date of Mr. X’s death, being the FMV of Note 1.

The Trust and Newco will jointly elect, in prescribed form and within the time
referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to
the transfer of the Class A common shares of the capital stock of Holdco held by
the Trust to Newco. The agreed amount in respect of the transfer will be equal to
the ACB of the Class A common shares of the capital stock of Holdco to the
Trust, as at the date of transfer. For greater certainty, the agreed amount will not
be less than the least of the amounts specified in subparagraphs 85(1)(c.1)(i) and
(ii) and the agreed amount also will not be less than the amount described in
paragraph 85(1)(b).

Newco will add to the stated capital of the Class G preferred shares of the capital
stock of Newco, a nominal amount which, for greater certainty, will not exceed
the maximum amount that could be added to the PUC of such shares, having
regard to paragraph 84.1(1)(a).

28. The Trust will also transfer its Class G preferred shares of the capital stock of
Holdco to Newco. The Trust will receive as consideration Note 2 issued by
Newco for an amount equal to $XXXXXXXXXX, being the FMV of the Class G
preferred shares of the capital stock of Holdco held at the date of transfer.
Paragraph 84.1(1)(b) will apply to this transfer, resulting in a dividend in the
amount of $XXXXXXXXXX, corresponding to the V-day value of the Class G
preferred shares of the capital stock of Holdco being transferred, which dividend
will be deemed to be paid to the Trust by Newco and received by the Trust from
Newco.

29. Mrs. X will transfer her Class B common shares of the capital stock of Holdco to
Newco. Mrs. X will receive as consideration Class G preferred shares of the
capital stock of Newco with a redemption value equal to the FMV of the Class B
common shares of the capital stock of Holdco held at the date of transfer.

Mrs. X and Newco will jointly elect, in prescribed form and within the time
referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to
the transfer of the Class B common shares of the capital stock of Holdco held by
Mrs. X to Newco. The agreed amount in respect of the transfer will be equal to
the ACB of the Class B common shares of the capital stock of Holdco to Mrs. X,
immediately before the transfer. For greater certainty, the agreed amount will not
be less than the least of the amounts specified in subparagraphs 85(1)(c.1)(i) and
(ii).

Newco will add to the stated capital of the Class G preferred shares of the capital
stock of Newco a nominal amount which, for greater certainty, will not exceed the
PUC, immediately before the disposition, of Mrs. X’s Class B common shares of
the capital stock of Holdco.

30. Mrs. X will transfer her Class G preferred shares of the capital stock of Holdco
held by Mrs. X to Newco. Mrs. X will receive as consideration Class G preferred
shares of the capital stock of Newco with a redemption value equal to the FMV of
the Class G preferred shares of the capital stock of Holdco held at the date of
transfer.

Mrs. X and Newco will jointly elect, in prescribed form and within the time
referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to
the transfer of the Class G preferred shares of the capital stock of Holdco held by
Mrs. X to Newco. The agreed amount in respect of the transfer will be equal to
the ACB of the Class G preferred shares of the capital stock of Holdco to Mrs. X,
immediately before the transfer. For greater certainty, the agreed amount will not
be less than the least of the amounts specified in subparagraphs 85(1)(c.1)(i) and
(ii).

Newco will add to the stated capital of the Class G preferred shares of the capital
stock of Newco a nominal amount which, for greater certainty, will not exceed the
PUC, immediately before the disposition, of Mrs. X’s Class G preferred shares of
the capital stock of Holdco.

31. Holdco will not be amalgamated with or wound-up into Newco for a period of at
least one year following the transfer of the shares of the capital stock of Holdco to
Newco. During that year, Holdco and Opco’s operations and business activities
will continue in the same manner as before the death of Mr. X.

32. After at least one year has elapsed since the transfer of the shares of the capital
stock of Holdco to Newco, Holdco will be amalgamated with or wound-up into
Newco. Pursuant to paragraph 88(1)(d) and within the limits of this provision,
Newco will designate an amount to increase the ACB of the shares of the capital
stock of Opco that will be distributed or acquired on the amalgamation /
winding-up. The purpose of this transaction is to benefit from a “bump” in the
cost of the shares of the capital stock of Opco in anticipation of a potential sale of
the shares. However, the shares of the capital stock of Opco will not be acquired
by a person described in subclauses 88(1)(c)(vi)(B)(I), (II) or (III) as part of the
series of transactions or events that includes the amalgamation of Holdco with
Newco or the winding-up of Holdco into Newco.

IV. ADDITIONAL INFORMATION

33. Subsequent to the amalgamation or winding-up of Holdco into Newco as
described in Paragraph 32, Newco may gradually begin to make payments on the
Notes to the Trust. In accordance with the provisions of Mr. X’s Will, the Trust
cannot distribute these funds, which represent capital to the Trust, until after five
years have elapsed from the date of Mr. X’s death, as described above. As such,
full reimbursement of the Notes will not occur until after that particular time.

34. During the one year time period following the transfer of the shares of the capital
stock of Holdco to Newco and subsequent to that particular time, Newco may pay
taxable dividends to the common shareholders equal to the amount of dividends
received from Holdco. Such dividends would be paid from the current year’s
earnings of either one or both of Holdco and Opco and, for greater certainty, these
dividends would not be funded through a disposition of corporate assets or
investments. When these dividends would be received by the Trust, they would
be distributed to the adult income beneficiaries.

V. PURPOSE OF THE PROPOSED TRANSACTIONS

35. The purpose of the Proposed Transactions is to ensure that the Trust holds
property with an ACB equal to the FMV of the shares of the capital stock of
Holdco immediately before Mr. X’s death, while minimizing the inherent double
tax exposure that can result from the application of subsection 70(5) in this
particular circumstance.

VI. RULINGS GIVEN

Provided that the preceding statements constitute a complete and accurate disclosure
of all of the relevant Facts, Proposed Transactions, Purpose of the Proposed
Transactions and Additional Information and provided that the Proposed Transactions
are completed in the manner described above, we confirm the following:

A. Section 84.1 will not apply, to reduce the PUC of the Class G preferred shares of the
capital stock of Newco or to deem the Trust to have received a dividend, on the
transfer of the Class A common shares of the capital stock of Holdco held by the
Trust to Newco as described in Paragraph 27 provided that,

(a) Note 1 is issued for an amount not to exceed the FMV of the Class A shares of the
capital stock of Holdco as at the date of Mr. X’s death, and,

(b) the PUC of the Class G preferred shares of the capital stock of Newco issued to
the Trust on the transfer described in Paragraph 27 is a nominal amount, not to
exceed the maximum amount that could be added to the PUC of such shares
having regard to paragraph 84.1(1)(a).

B. Section 84.1 will apply to the transfer of the Class G preferred shares of the capital
stock of Holdco held by the Trust to Newco as described in Paragraph 28 such that a
dividend in the amount of $XXXXXXXXXX (corresponding to the V-day value of
the Class G preferred shares of the capital stock of Holdco being transferred) will be
deemed to be paid to the Trust by Newco and received by the Trust from Newco.

C. Subsection 84(2) will not apply as a result of the Proposed Transactions, in and by
themselves, to deem Holdco to have paid, and the Trust to have received, a dividend
on the Class A common and the Class G preferred shares of the capital stock of
Holdco held by the Trust.

D. The provisions of subsection 245(2) will not apply as a result of the Proposed
Transactions, in and by themselves, to re-determine the tax consequences stated in the
rulings given above.

The above rulings are given subject to the limitations and qualifications set forth in
Information Circular 70-6R5 issued on May 17, 2002, and are binding on the CRA
provided that the Proposed Transactions described in paragraphs 25 to 30 are completed
before XXXXXXXXXX.

The above rulings are based on the Act in its present form and do not take into account
any proposed amendments to the Act which if enacted, could have an effect on the
rulings provided herein.

COMMENTS

Unless otherwise expressly confirmed, nothing in this letter should be construed as
implying that the CRA has confirmed, reviewed or has made any determination in respect
of:

(a) the PUC of any share or the ACB or FMV of any property referred to herein;

(b) the balance of CDA, GRIP or RDTOH of any corporation; or,

(c) any other tax consequence relating to the Facts, Proposed Transactions or any
transaction or event taking place either prior to the Proposed Transactions or
subsequent to the Proposed Transactions, whether described in this letter or not,
other than those specifically described in the rulings given above.

Nothing in this letter should be construed as confirmation, express or implied, that, for
the purpose of any of the rulings given above, any adjustment to the FMV of the
properties transferred or the redemption amount of the shares issued as consideration,
whether pursuant to a price adjustment clause or otherwise, will be effective retroactively
to the time of the transfer and issuance of shares. Furthermore, none of the rulings given
in this letter are intended to apply to or in the event of the operation of a price adjustment
clause, since such adjustment will be due to circumstances that do not constitute proposed
transactions that are seriously contemplated. The general position of the CRA with
respect to price adjustment clauses is stated in Interpretation Bulletin IT-169.

An invoice for our fees in connection with this ruling request will be forwarded to you
under separate cover.

Yours truly,

XXXXXXXXXX.
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch